Press Release

Limelight Networks(R) Reports Strong Financial Results for the Second Quarter of 2018

Company Release - 7/19/2018 4:01 PM ET

Revenue of $50.2 million, up 11 percent year over year

GAAP gross margin of 49.4%, up 230 basis points, year over year

GAAP basic EPS of $0.14 and Non-GAAP EPS of $0.04

Cash and marketable securities of $45.6 million

Raises revenue guidance for full year 2018, with lower capital
expenditures

TEMPE, Ariz.--(BUSINESS WIRE)--
Limelight Networks, Inc. (Nasdaq:LLNW) (Limelight), a global leader in
digital content delivery, today reported revenue of $50.2 million for
the second quarter of 2018, up 11% compared to $45.4 million in the
second quarter of 2017. Currency did not materially impact reported
revenue in the quarter.

Gross margin was 49.4% in the second quarter of 2018, an increase of 230
basis points from 47.1% in the second quarter of 2017.

On a GAAP basis, Limelight reported net income of $15.2 million, or
$0.14 per basic share and $0.13 per fully diluted share, for the second
quarter of 2018, compared to a net loss of $1.6 million, or $0.01 per
basic share, in the second quarter of 2017. Net income in the second
quarter of 2018 included $14.9 million of non-operating income ($0.13
per basic share and $0.12 per fully diluted share) related to a
settlement and patent license agreement.

Non-GAAP net income was $4.0 million, or $0.04 per basic share, for the
second quarter of 2018, compared to $2.9 million, or $0.03 per basic
share, in the second quarter of 2017.

EBITDA was $20.3 million for the second quarter of 2018, compared to
$3.4 million for the second quarter of 2017. Adjusted EBITDA was $9.2
million for the second quarter of 2018, compared to $7.9 million for the
second quarter of 2017.

Limelight ended the second quarter with 549 employees and employee
equivalents, up from 544 at the end of the first quarter of 2018, and up
from 533 in the year ago period.

“Limelight’s customers rewarded us once again in the second quarter of
2018, for our commitment to providing them with the best tools, value,
reliability, and customer care. Limelight’s revenues grew more than 11%
over the prior year quarter, driven by video delivery services.
Limelight generated strong operating cash flow for the quarter, and
further strengthened its balance sheet. After raising full-year guidance
in April, we remain on track to achieve those results, on even lower
capital expenditures. We’re pleased with Limelight’s results through the
half-year mark, and owe great thanks to each of our committed employees
for putting us on track to make 2018 our best year yet,” said Bob Lento,
Chief Executive Officer, Limelight Networks.

“Financial discipline, along with continued investments in people,
technology, and services, and our deep understanding of the intricacies
of delivering content closer to the consumer, uniquely position
Limelight to capitalize on emerging opportunities in low-latency,
secure, Edge computing, analytics and communications. We continue to
find opportunities to tune our infrastructure for sustained, cost
efficient growth, to fully exploit Limelight’s unique Edge-centric
platform, and to generate higher shareholder returns,” Lento added.

Based on current conditions, we are raising our previously issued
guidance on April 19, 2018 for revenue, from $198 to $202 million to
$200 to $203 million. Gross margin percentage improvement, GAAP earnings
per share, non-GAAP earnings per share, and adjusted EBITDA remain
unchanged. We now expect capital expenditures to be below $20 million
for the full year, down from our previous expectation of between $20 and
$22 million.

To evaluate our business, we consider and use non-generally accepted
accounting principles (Non-GAAP) net income (loss), EBITDA and Adjusted
EBITDA as supplemental measures of operating performance. These measures
include the same adjustments that management takes into account when it
reviews and assesses operating performance on a period-to-period basis.
We consider Non-GAAP net income (loss) to be an important indicator of
overall business performance. We define Non-GAAP net income (loss) to be
U.S. GAAP net income (loss) adjusted to exclude the settlement and
patent license income, share-based compensation and litigation expenses.
We believe that EBITDA provides a useful metric to investors to compare
us with other companies within our industry and across industries. We
define EBITDA as U.S. GAAP net income (loss) adjusted to exclude
depreciation and amortization, interest expense, interest and other
(income) expense, and income tax expense. We define Adjusted EBITDA as
EBITDA adjusted to exclude the settlement and patent license income,
share-based compensation and litigation expenses. We use Adjusted EBITDA
as a supplemental measure to review and assess operating performance.
Our management uses these Non-GAAP financial measures because,
collectively, they provide valuable information on the performance of
our on-going operations, excluding non-cash charges, taxes and non-core
activities (including interest payments related to financing
activities). These measures also enable our management to compare the
results of our on-going operations from period to period, and allow
management to review the performance of our on-going operations against
our peer companies and against other companies in our industry and
adjacent industries. We believe these measures also provide similar
insights to investors, and enable investors to review our results of
operations “through the eyes of management.”

Furthermore, our management uses these Non-GAAP financial measures to
assist them in making decisions regarding our strategic priorities and
areas for future investment and focus.

The terms Non-GAAP net income (loss), EBITDA and Adjusted EBITDA are not
defined under U.S. GAAP, and are not measures of operating income,
operating performance or liquidity presented in accordance with U.S.
GAAP. Our Non-GAAP net income (loss), EBITDA and Adjusted EBITDA have
limitations as analytical tools, and when assessing our operating
performance, Non-GAAP net income (loss), EBITDA and Adjusted EBITDA
should not be considered in isolation, or as a substitute for net income
(loss) or other consolidated income statement data prepared in
accordance with U.S. GAAP. Some of these limitations include, but are
not limited to:

EBITDA and Adjusted EBITDA do not reflect our cash expenditures or
future requirements for capital expenditures or contractual
commitments;

these measures do not reflect changes in, or cash requirements for,
our working capital needs;

Non-GAAP net income (loss) and Adjusted EBITDA do not reflect the cash
requirements necessary for litigation costs, including provision for
litigation and litigation expenses;

these measures do not reflect the interest expense, or the cash
requirements necessary to service interest or principal payments, on
our debt that we may incur;

these measures do not reflect income taxes or the cash requirements
for any tax payments;

although depreciation and amortization are non-cash charges, the
assets being depreciated and amortized will be replaced sometime in
the future, and EBITDA and Adjusted EBITDA do not reflect any cash
requirements for such replacements;

while share-based compensation is a component of operating expense,
the impact on our financial statements compared to other companies can
vary significantly due to such factors as the assumed life of the
options and the assumed volatility of our common stock; and

other companies may calculate Non-GAAP net income (loss), EBITDA and
Adjusted EBITDA differently than we do, limiting their usefulness as
comparative measures.

We compensate for these limitations by relying primarily on our U.S.
GAAP results and using Non-GAAP net income (loss), EBITDA, and Adjusted
EBITDA only as supplemental support for management's analysis of
business performance. Non-GAAP net income (loss), EBITDA and Adjusted
EBITDA are calculated as follows for the periods presented in thousands:

Reconciliation of Non-GAAP Financial Measures

Limelight is presenting the most directly comparable U.S. GAAP financial
measures and reconciling the non-GAAP financial metrics to the
comparable U.S. GAAP measures. Per share amounts may not foot due to
rounding.

LIMELIGHT NETWORKS, INC.

Reconciliation of U.S. GAAP Net Income (Loss) to Non-GAAP Net
Income

(In thousands)

(Unaudited)

Three Months Ended

Six Months Ended

June 30, 2018

March 31, 2018

June 30, 2017

June 30, 2018

June 30, 2017

Amount

Per Share

Amount

Per Share

Amount

Per Share

Amount

Per Share

Amount

Per Share

U.S. GAAP net income (loss)

$

15,159

$

0.14

$

149

$

0.00

$

(1,625

)

$

(0.01

)

$

15,308

$

0.14

$

(4,962

)

$

(0.05

)

Settlement and patent license income

(14,900

)

(0.13

)

-

-

-

-

(14,900

)

(0.13

)

-

-

Share-based compensation

3,557

0.03

3,367

0.03

3,255

0.03

6,924

0.06

6,330

0.06

Litigation expenses

215

0.00

2,670

0.02

1,276

0.01

2,885

0.03

3,185

0.03

Non-GAAP net income

$

4,031

$

0.04

$

6,186

$

0.06

$

2,906

$

0.03

$

10,217

$

0.09

$

4,553

$

0.04

Weighted average basic shares used in per share calculation

111,356

110,761

108,422

111,059

107,893

LIMELIGHT NETWORKS, INC.

Reconciliation of U.S. GAAP Net Income (Loss) to EBITDA to
Adjusted EBITDA

(In thousands)

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

June 30,

June 30,

2018

2018

2017

2018

2017

U.S. GAAP net income (loss)

$

15,159

$

149

$

(1,625

)

$

15,308

$

(4,962

)

Depreciation and amortization

4,829

4,968

5,128

9,797

10,274

Interest expense

7

59

10

66

24

Interest and other (income) expense

87

(242

)

(274

)

(154

)

(480

)

Income tax expense (benefit)

249

(15

)

151

234

260

EBITDA

$

20,331

$

4,919

$

3,390

$

25,251

$

5,116

Settlement and patent license income

(14,900

)

-

-

(14,900

)

-

Share-based compensation

3,557

3,367

3,255

6,924

6,330

Litigation expenses

215

2,670

1,276

2,885

3,185

Adjusted EBITDA

$

9,203

$

10,956

$

7,921

$

20,160

$

14,631

For future periods, we are unable to provide a reconciliation of EBITDA
and Adjusted EBITDA to net income (loss) as a result of the uncertainty
regarding, and the potential variability of, the amounts of depreciation
and amortization, interest expense, interest and other (income) expense
and income tax expense, that may be incurred in the future.

2018 Guidance Table

Limelight Networks, Inc.

2018 Guidance

July 19, 2018

April 19, 2018

February 7, 2018

Revenue

$200 to $203 million

$198 to $202 million

$196 to $200 million

Gross margin percentage

No change

Expansion of 150 basispoints over 2017

Expansion of more than 100basis points over 2017

GAAP EPS

No change

$0.07 to $0.11

$(0.07) to $(0.03)

Non-GAAP EPS

No change

$0.13 to $0.17

$0.11 to $0.15

Adjusted EBITDA

No change

$33 to $37 million

$32 to $36 million

Capital expenditures

Below $20 million

$20 to $22 million

$22 to $24 million

Conference Call

At approximately 4:30 p.m. EST (1:30 p.m. PST) today, management will
host a quarterly conference call for investors. Investors can access
this call toll-free at 877-296-5190 within the United States or +1
412-317-5233 outside of the U.S. The conference call will also be audio
cast live from http://www.limelight.com
and a replay will be available following the call from the Limelight
website.

Forward-Looking Statements

This press release contains forward-looking statements that involve
risks and uncertainties. These statements include, among others,
statements regarding our expectations regarding revenue, gross margin,
non-GAAP net income, capital expenditures, litigation, and our future
prospects. Our expectations and beliefs regarding these matters may not
materialize. The potential risks and uncertainties that could cause
actual results or outcomes to differ materially from the results or
outcomes predicted include, among other things, reduction of demand for
our services from new or existing customers, unforeseen changes in our
hiring patterns, adverse outcomes in litigation, and experiencing
expenses that exceed our expectations. A detailed discussion of these
factors and other risks that affect our business is contained in our SEC
filings, including our most recent reports on Forms 10-K and 10-Q,
particularly under the heading “Risk Factors.” Copies of these filings
are available online on our investor relations website at
investors.limelightnetworks.com and on the SEC website at www.SEC.gov.
All information provided in this release and in the attachments is as of
July 19, 2018, and we undertake no duty to update this information in
light of new information or future events, unless required by law.

About Limelight

Limelight Networks, a global leader in digital content delivery,
empowers customers to better engage online audiences by enabling them
to securely manage and globally deliver digital content, on any device.
The company’s Limelight Orchestrate Platform includes a global
infrastructure with a fully-integrated suite of capabilities and
services to help you address all your content delivery needs. The
Orchestrate Platform solves your most important content delivery
challenges so you can deliver the next great digital experience
anywhere. For more information, please visit www.limelight.com and
follow us on Twitter, Facebook and LinkedIn.

Copyright (C) 2018 Limelight Networks, Inc. All rights reserved. All
product or service names are the property of their respective owners.